Trouble Company - Depreciation Calculation

Trouble Company purchased equipment of January 1. 2006, for $60,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5- year useful life. It is also estimated that the equipment will produce 1000.000 units over is 5-year life.

2. If 16,000 units of product are produced in 2006, and 24,000 units are produced in 2007, what is the book value of the equipment at December 31, 2007? The company uses the units -of-activity depreciation method.

3. If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation-Equipment account at December 31, 2008?

Solution Preview

1. Compute the amount of depreciation expense for the year ended December 31, 2006, using the straight-line method of depreciation.